Answered: mine the IRR of this project. Is it…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter26: Capital Investment Analysis

Section: Chapter Questions

Problem 3CMA

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Rightway Enterprises accepts projects earning more than the firm’s 15% cost of capital. Rightway is currently considering a 10-year project that provides annual cash inflows of $10,000 and requires an initial investment of $61,450.

a.Determine the IRR of this project. Is it acceptable?

b.Assuming that the cash inflows continue to be $10,000 per year, how many additional years would the flows have to continue to make the project acceptable (that is, to make it have an IRR of 15%)?

c.With the given life, initial investment, and cost of capital, what is the minimum annual cash inflow that the firm should accept?

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